Gross negligence in issuing utilisation certificates can amount to professional misconduct, with proof standards in disciplinary cases set above preponderance.

A chartered accountant was found to have committed professional misconduct for gross negligence in issuing utilisation certificates without adequate verification of supporting records. The Court held that a certificate-issuing professional must exercise reasonable care and due diligence, and that the omissions in both certificates showed insufficient disclosure and lack of documentary support. It also clarified that disciplinary proceedings under the Chartered Accountants Act are not decided on the criminal standard of beyond reasonable doubt; the proof required is higher than a mere balance of probabilities, but short of that threshold. The misconduct finding was upheld, but the proposed removal from membership was replaced with a severe reprimand.

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Issues: Whether the chartered accountant was guilty of professional misconduct under clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949 for gross negligence in issuing the utilisation certificates, and what order should follow under Section 21(6) of the Act.

Analysis: A chartered accountant issuing certificates is expected to verify the underlying records with reasonable care and due diligence. The record showed that the first utilisation certificate was issued without adequate disclosure of reliance on another firm's certificate, and that the second certificate was issued without any supporting documents showing return of the earlier machinery or purchase of the substituted machinery. The Court held that such conduct reflected a lack of necessary care and amounted to gross negligence within the meaning of clause (7). On the standard of proof, the Court held that disciplinary proceedings under the Act are not governed by the criminal standard of beyond reasonable doubt; the requisite standard is higher than a mere balance of probabilities, but it does not reach the criminal threshold.

Conclusion: The finding of professional misconduct was upheld, but the recommended removal from membership was not accepted; the Court substituted a severe reprimand under Section 21(6)(b) of the Act.

Ratio Decidendi: In disciplinary proceedings against chartered accountants, issuance of certificates without adequate verification of supporting records may constitute gross negligence amounting to professional misconduct, and such proceedings must be proved by a degree of certainty higher than preponderance of probabilities but short of proof beyond reasonable doubt.

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